Compliances relating to Transfer Pricing


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Services covered :
  • Complying with transfer pricing rules and regulations

FAQ ()

Question : What is the meaning of transfer pricing?
Answer : Transfer pricing can be defined as the value of goods or services transferred between related parties. In other words, transfer pricing is the price that is paid for goods or services transferred from one unit of an organization to its other units situated in different countries (with exceptions)
Question : What is the need of transfer pricing?
Answer : Related Parties may transact on different prices which are not arms length price. Because of this tax planning's are possible and government may have tax loss. Thus transfer pricing concept arises and the transaction will be taken on arms length price.
Question : What is arm length price?
Answer : The price at which a willing buyer and a willing unrelated seller would freely agree to transact or a trade between related parties that is conducted as if they were unrelated, so that there is no conflict of interest in the transaction.
Question : What are different methods to calculate the arm length price?
Answer : 1. Comparable Uncontrolled Price Method;
2. Resale Price Method;
3. Cost Plus Method;
4. Profit Split Method;
5. Transaction Net Margin Method
Question : Is there any form to be submitted for the transfer pricing transaction initiated?
Answer : Any person who has involved in an international transaction in the previous year shall submit the report in Form 3CEB through a Chartered Accountant, duly verified by him, on or before the date prescribed by the authority, furnishing all the required details.
Question : Does transfer pricing apply to transactions between head office and branch?
Answer : No. head office and branch are same and transfer pricing provisions will not apply in internal transfer. But if branch declares it as a permanent establishment then transfer pricing provisions may applicable.
Question : What is an Associated enterprise?
Answer : When one enterprise
1) can participate in the second enterprise; or
2) a third enterprise participates in both the first and second enterprise; directly, or indirectly, or through one or more intermediaries, and where such participation is through the capital, management or control, then such first and second enterprises are known as ‘Associated Enterprises’.